Tax Snacks: Special 2017 Tax Season Edition

Note: The filing deadlines for several forms have changed, effective this filing season. The most commonly-encountered forms affected by this change undergo a swap in the deadlines between Forms 1120 and 1065 (C-corporations vs. partnerships/LLCS).

March 15

2016 income tax returns are due for calendar year partnerships, LLCs and S-corporations

March 31

1099s and W-2s are due to IRS for those who e-file

April 1

The initial Required Minimum Distribution (RMD) must be taken by beneficiaries of Qualified Retirement Plans (like IRAs) who turned age 70 ½ anytime during 2016

April 15

2016 income tax returns are due for individuals and calendar year C-corporations and trusts

1st quarter 2016 estimated tax payments are due for individuals and calendar year trusts and corporations

Last day to make an IRA contribution for the 2016 tax year

May 15

Tax-exempt organization returns (Form 990 series) are due for calendar year entities

Time is running out for taxpayers to file belated 2013 income tax returns, and claim refunds of any related taxes. The IRS is currently sitting on deposits (withholdings from wages, etc.) for that year amounting to roughly $1 billion. For most filers, the statute of limitations for claiming refunds of those taxes ends on April 18, 2017 (three years after the original Form 1040 filing deadline). After that, this permanently becomes property of the U.S. Treasury. More information may be found on the IRS website.

If you do not have sufficient funds to pay your tax, do not simply ignore your April 15 filing requirement (technically April 18 this year, due to the 15th falling on a weekend and observation of Emancipation Day on the 17th). Instead, be sure to timely file a return or an extension – even if you cannot pay the tax due that is shown on those documents. This is important because while some penalties will be assessed for not paying your tax, significantly worse penalties will be assessed for not filing a return when required (as much as ten times higher than the penalty for not paying). More information about this, and details regarding how to apply for a payment plan, may be found on the IRS website.

According to the voice in my head that makes up accurate-sounding statistics, 94% of the time someone claims “no pun intended,” they are lying. That is all I will say about the choice of wording in the caption above. Here are my thoughts on its subject matter:

Since its inception, portions of the Affordable Care Act (“ACA”) have been reportable on individuals’ tax returns. For instance, Form 1040 asks questions regarding whether taxpayers carry “minimum essential coverage.” Form 1040 also computes insurance premium rebates for some taxpayers and penalties (“shared responsibility payments”) for others, depending on a number of variables.

President Trump issued Executive Order 13765 a few weeks ago, instructing all branches of government to waive or grant exemptions for any provision of the ACA that would impose a tax or fiscal burden on individuals. This could be interpreted by some to mean that a shared responsibility penalty should not be reported on 2016 Form 1040, even though it is a component of overall tax.

However, the shared responsibility payment exists as part of the Internal Revenue Code, and the president does not have the authority to unilaterally negate it. This leaves the IRS in an awkward position: A division of the executive branch of government was asked by the head of the executive branch to forgo enforcing rules created by the legislative branch of government. Initially the IRS indicated that it would reject returns that did not report coverage or that failed to properly compute a penalty. However, it has reversed its stance somewhat. It no longer will automatically reject such returns, but it is unclear to what extent it will process and finalize them.

This author’s stance is that until the Internal Revenue Code is altered, any tax returns that omit the ACA information or fail to compute the associated penalties are improperly-prepared – in spite of the Executive Order.

Disclaimer of Liability: This publication is intended to provide general information to our clients and friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.